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SSAS Pensions are an amazing tool to supersize your property portfolio. It’s the most flexible type of pension in the UK and has some amazing benefits. Yet most people have never heard of them!
In the UK, there’s over £6trillion of money inside pensions. Most of this money is invested in poorly performing mutual funds. With SSAS, you can harness the power of your pension pot and create amazing wealth.
SSAS and Property go hand in hand. You can use SSAS Pensions to buy commercial property. You can lend money to your limited company, and use those funds to invest in property. Best of all, SSAS pension funds are free of Capital Gains Tax, Income Tax and Corporation Tax. In this article, I provide 13 creative SSAS Property strategies.
One definite restriction is that you can’t own residential property inside your SSAS. This is an absolute restriction. If anybody tries to tell you otherwise, then please run a mile!
Choose the right SSAS Pension Provider
With SSAS pensions, it’s so important to choose the right pension provider. If you choose the wrong provider, things can turn into a nightmare. A bad SSAS Provider could clobber you with fees and not allow you to invest in what you want.
SSAS Pensions are a niche product and historically, some providers have provided a poor service. Many providers charge hidden extra fees, e.g. £3,000 in ‘advice’ to buy a commercial property! Providers might prevent you from making certain investments, even though the law lets you do it. For example, you’re allowed to hold foreign property inside a SSAS. But many providers won’t let you do it, as it’s more work for them.
I work with an excellent SSAS Provider. They charge flat fees, so you have complete transparency over costs. They don’t charge to transfer your existing pension funds to your SSAS. Also, if the law allows you to own something inside your SSAS, then they’ll let you do it.
If you want to set up a call and find out more, then contact me. Email me or call me on +44 7930 322 555.
Please note that I’m not a qualified accountant or Independent Financial Advisor. I’m providing information, based on my experience as an investor, business owner and SSAS trustee. Any financial decision you make is your own, and you must take independent financial advise.
With a SSAS Pension, you can make a loan to your limited company. You can use these funds to invest in property (or any other commercial endeavour). The loan size is limited to 50% of the value of your SSAS Pension. This feature is called a ‘loan back’ and can’t be done by any other type of pension.
Even better, you can choose the interest rate that you pay. The minimum rate is “1% above the Average Base Rate of the six leading high-street banks”. This will normally be the cheapest loan that you can get. And don’t forget, the interest payments are made to your pension and not a bank. You create this wonderful circular economy.
Bridging loans are a very expensive form of finance. Rates are normally between 10-24% per year. Bridging is used, when you can’t get a mortgage or any other type of loan. For this reason, I’ve never taken a bridging loan myself!
However, with your SSAS pension, you become the bank. You can offer bridging loans to property investors and receive large interest income. To protect your SSAS pension, you must have security over an asset (e.g. a property). So if the borrower fails to pay you back, you take ownership of that asset.
This is a highly lucrative SSAS property strategy
You can use your SSAS Pension to buy commercial property. This is a strategy that I absolutely love! I’m a massive fan of commercial property investment. Stamp duty is much lower for commercial properties, compared to residential. Yields of 10%+ are easily achievable with commercial property. I’ve written articles about commercial property investment. Go here and here.
I think commercial property is terrific. The fact that I can use my pension pot to buy commercial, is even better.
You can own commercial property inside your SSAS. You can also get a mortgage on the properties inside your SSAS. This is incredibly powerful.
Assume your SSAS Pension owns a property worth £200,000. You get a mortgage loan on that property for £140,000. You can then use £100,000 for a loan back to your limited company. You can could also use the remaining £40,000 to provide a bridging loan for 12% per year.
With SSAS, there are opportunities to have multiple sources of income.
Note that SSAS mortgages are limited to 50% of the total value of your SSAS. So your entire SSAS would need to be worth at least £280,000.
You can own foreign property inside a SSAS Pension. This is one area where you must work with a good pension provider. A lot of SSAS pension providers (maybe most?) won’t allow customers to buy foreign property. This is because more work is involved for them.
If you do want to buy foreign property, speak to your SSAS Provider at the beginning. Ask if they’ll let you to do it.
Commercial conversions are a hugely profitable strategy. You can convert older commercial properties into modern residential property. This is hugely popular for a few reasons:
- The residential property is normally worth far more than the old commercial property
- The Government provides simplified planning rules for these conversions. Under permitted development
- There’s loads of old commercial properties knocking around
You can use your SSAS to facilitate these conversions. You can do a loan back to your limited company. You can use those funds to buy a commercial property and convert to residential. Once you sell the properties on at a profit, you can repay your loan back.
You can carry out a commercial conversion inside your SSAS Pension. You can buy the commercial property with your SSAS Pension and carry out the conversion. As I mentioned above, you can’t own residential property inside your SSAS. So you must sell the property, before the residential conversion is completed.
The below video provides more details about Commercial Conversions.
This is a terrific SSAS Property strategy. Many people use their SSAS pension to buy a property, that they run their business from.
This can be hugely powerful. Let’s assume that an accountant has a SSAS Pension, and he buys an office for £300,000 with the SSAS. He then runs the accountancy from there. He’s saved his business £300,000.
The accountancy business will have to pay rent to the SSAS. Let’s say that it’s £1,000 per month. This reduces the taxable profits of the accountancy. The £1,000 per month will go the SSAS pension, and not be subject to income tax or corporation tax.
So many wins from one strategy!
Another amazing SSAS Property strategy. You can sell properties that you already own to your SSAS pension. By doing this, you release funds from your pension pot, that you can use today.
Assume that you have £400,000 inside your SSAS pension. You can’t take money out of your pension until you’re 55. However, you can sell a commercial property that you already own to your SSAS pension. If the property is worth £400,000, then you release that money from your pension. You can use that money to spend on what you want, today.
This strategy is more powerful than it 1st seems. That £400,000 in your pension has already benefitted from tax relief. When you make a contribution to your pension, you get a refund of the tax that you paid. That refund could be up to 60% of your contribution. So if you put £10,000 into your pension, you get a £6,000 tax refund from HMRC. I provide a worked example of pension tax relief in this article.
Planning gains are a SSAS Property strategy that I like. You can make decent profits without too much work.
You can buy commercial property and then obtain planning permission on the property. The planning permission might allow you to convert the commercial property into a residential property. As you can’t own residential property inside the SSAS, you might not want to convert the property yourself. However, you can sell the property to a developer. Because the property now has planning permission, you can sell it for a higher price.
A SSAS pension can have up to 11 members. You might choose add your children as trustees of the SSAS pension. Your SSAS pension doesn’t form part of your estate and can be passed on without inheritance tax.
This is pretty cool! If your SSAS pension owns property, it means the property can be passed on to your kids – tax free.
Hotels are another SSAS property strategy. SSAS Pensions can own hotels. My personal dream is to run a hotel one day – let’s see if it happens! Travel is my passion, and you can find out more on my travel blog.
If your SSAS owns property, you can lend that property to a developer. The strategy works as follows
- Get the value of the property that you want to lend out
- Agree an interest rate at which the borrower will pay
- Lend the property to the borrower
- The borrower completes the renovation work on the project. They sell the property and repay your SSAS
This is definitely a more advanced SSAS property strategy. But it shows what can be done if you get creative.
This article was jam packed with value bombs! I provided details of 13 terrific SSAS Property strategies. You can use these strategies to supersize your property portfolio.
Frankly, I’ve only scratched the surface. The great thing about SSAS is that it’s so flexible. You can take these strategies and tailor them to your own personal circumstances.
If you want help to set up your SSAS Pension, email me or call me on +44 7930 322 555.
The below video provides more details about how to use your SSAS for commercial property.
I have absolutely tons of free education on my blog. Below are some articles that might be of interest.
What is a SSAS Pension? The amazing benefits of this wealth creation tool
Transfer your buy to let property to a company – tax free. Section 24 Loophole
Tax Strategies: What is Section 24? How to avoid it
Landlord skills: Long distance property investing. How to do it right
Tax 101: Buy to let taxes. What do you have to pay?